Lang, Ofek, and Stulz (1996) Analyzed the Relationship Between Leverage

question 3

Short Answer

Lang, Ofek, and Stulz (1996) analyzed the relationship between leverage and growth opportunities.They focus on the market's assessment of the ability of the firm to generate profitable growth.Their measure of profitable growth opportunities is Tobin's q ratio, the ratio of the market value of the firm's equity to its book value.They summarize their results as follows: "We show that there is a negative relation between leverage and future growth.This negative relation between leverage and growth holds for firms with (i) Tobin's q ratio, but not for firms with (ii)__ Tobin's q.
$\begin{array} { l c l } & \text { (i) } & \text { (ii) } \\\text { a. } & \text { low } & \text { high } \\\text { b. } & \text { high } & \text { low }\end{array}$

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Definitions:

Renovascular Hypertension

High blood pressure caused by narrowing (stenosis) of the arteries that supply blood to the kidneys.

Patient Diagnosed

Refers to the determination of a patient's specific condition or disease through medical evaluation and testing.

Correct Code

In a coding or classification context, the accurate representation or identification for a specific item or concept.

Systolic/Diastolic Measurement

A representation of blood pressure marked by the maximum phase (systolic) and minimum phase (diastolic) of the heart's cycle.